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Low Rent Landlord? I Love you!

Everyone is excited by the huge gains in property values made in the last few years.

Well, almost everyone.

Anyone who knows me knows that, while I am pleased with these gains, I am also of the mind that there is a dwindling supply of homes for people who are not in the position of affluence.

Everyone needs a place to live. This includes people who are unable to purchase a property for whatever personal reasons may exist in their lives.

Income level, credit rating, personal tragedy, family break-ups, uncontrollable circumstances of any kind can lead to being in the position that those of us who are happy little mortgage carriers can sometimes not imagine, particularly in this climate of huge real estate profits.

It is unfortunate that this group of people includes those who also must put a roof over the heads of their own family members. Loving parents and grandparents strive to keep their little ones safe and secure while handing over huge amounts of rent each month.

Recently, I have had the unenviable task of helping such families locate new homes as they are evicted from their rental homes for the sale of the property by the landlord.

Imagine you have been paying a reasonable rent for years for a 3-bedroom townhouse that used to be valued at $199k. Maybe you have been paying $1400 per month for rent.

The landlord would have a maximum mortgage of around $150k which would cost him about $750 per month plus about $200 in property tax. This leaves him with a little profit which offsets any wear and tear and repairs on the property. Not a horrible deal, huh?

Now let's throw in the crazy hot real estate market. Over the last several years, while you have grown accustomed to the locale and your routines and your kids are nicely settled in the local schools, the value of the house has increased by about 100%, maybe even more.

At $400k, the house is now a lovely little nest egg and the landlord decides to sell the property to cash out that equity.

The buyer's new mortgage for a non-occupant owner will be about $300k with a monthly payment of $1500 and property tax of $300-$400. How does your $1400 rent compare now?

The only way the new landlord will be able to recoup the monthly costs and make a little profit for contingencies will be to charge as much as $2500 per month. Law prevents him from increasing your rent to such an amount.

The way around this is to evict you before the sale and let the new owner do whatever they want with the property.

Here is the problem for you: $1400 no longer gets you a home big enough for your family in the same area.

So now you have less than 60 days to figure out a new budget and find a place which is suitable.

Enter the Low Rent Landlords, also known as my heroes.

They are not looking to increase rents. Their mortgages are small because they have held their properties for a long time. They don't invest heavily in brand new updates and are more likely to find building materials at the Habitat for Humanity store than at the Lowes or Home Depot.

These frugal actions are going to keep the rent at a nice low level. It will stay affordable for people who have not been given a 100% raise over the same last few years.

These landlords are my heroes because they know that everyone needs a place to live and they feel the need to provide homes for people.

So for those looking to make an investment purchase, I say be a hero.

Look for homes in less than perfect condition and don't renovate. Keep your costs down by being frugal. Seek out tenants who are capable and willing to care for the property and the grounds.

Helping a modest breadwinner put a safe and affordable roof over their family can be a rewarding thing for the spirit if not for the wallet.